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Article
The Evolution of the Subprime Mortgage Market
Federal Reserve Bank of St. Louis Review
  • Souphala Chomsisengphet, Office of the Comptroller of the Currency
  • Anthony Pennington-Cross, Marquette University
Document Type
Article
Language
eng
Format of Original
26 p.
Publication Date
1-1-2006
Publisher
Federal Reserve Bank of Saint Louis
Abstract

This paper describes subprime lending in the mortgage market and how it has evolved through time. Subprime lending has introduced a substantial amount of risk-based pricing into the mortgage market by creating a myriad of prices and product choices largely determined by borrower credit history (mortgage and rental payments. foreclosures and bankruptcies, and overall credit scores) and down payment requirements. Although sub prime lending still differs from prime lending in many ways, much of the growth (at least in the securitized portion of the market) has come in the least-risky (A-) segment of the market. In addition, lenders have imposed prepayment penalties to extend the duration of loans and required larger down payments to lower their credit risk exposure from high-risk loans.

Comments

Published version. Federal Reserve Bank of St. Louis Review, Vol. 88, No. 1 (January/February 2006): 31-56. Permalink.

Originally published in Federal Reserve Bank of St. Louis Review. © 2006 by the Federal Reserve Bank of St. Louis. All views expressed herein are those of the author(s) and not necessarily those of the Federal Reserve Bank of St. Louis or the Federal Reserve System. Used with permission.

Anthony Pennington-Cross was affiliated with Federal Reserve Bank of St. Louis at the time of publication.

Citation Information
Souphala Chomsisengphet and Anthony Pennington-Cross. "The Evolution of the Subprime Mortgage Market" Federal Reserve Bank of St. Louis Review (2006) ISSN: 0014-9187
Available at: http://works.bepress.com/anthony_pennington_cross/34/